Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105936
Authors: 
Garz, Marcel
Year of Publication: 
2010
Series/Report no.: 
IMK Working Paper 12/2010
Abstract: 
The creation of jobs in the low-pay sector is considered to be an approach to reduce unemployment, especially with respect to low-skilled workers. By now, the expansion of the German low-wage sector over the last 15 years is empirically confirmed, which indicates a successful implementation of corresponding recommendations from policy advisers. In order to evaluate the effects of an increasing low-wage sector on unemployment, the concept of the non-accelerating inflation rate of unemployment (NAIRU) is used. In a first step, the unobservable, exogenous NAIRU is estimated for Germany in a state space setting. In a second step, data from the German Socio-Economic Panel (SOEP) is used to calculate a time series of the extent of the low-pay sector. Finally, by treating the NAIRU as the dependent variable, the impact of the low-wage share is estimated within an error correction framework. According to the proponents of the low-pay expansion, there should be a negative relationship between the NAIRU and the share of the low-wage sector. This hypothesis is rejected empirically. Indeed, for the time after the German reunification, cointegration is found between both variables suggesting a slightly positive relationship.
Subjects: 
NAIRU
low-wage
Kalman filter
error correction
cointegration
JEL: 
C22
C32
E24
J30
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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